James Murdoch to move to News Corp.

Stepping down as CEO of BSkyB to be CEO of News Corp. in Europe, Asia

LONDON (MarketWatch) -- James Murdoch said Friday he was stepping down as chief executive of U.K. satellite provider British Sky Broadcasting for an executive slot at News Corp., a role that could position him to take the reins of the media conglomerate from his father, Rupert.

BSkyB (BSY)
BSY, -4.76%
said the younger Murdoch will step down as chief executive but will replace his 76-year-old father as chairman.

James will become chairman and chief executive of News Corp.
NWS, +0.00%
in Europe and Asia, where he will have oversight of operations ranging from British tabloid The Sun to the Asian satellite service Star, which he used to run.

Jeremy Darroch, BSkyB's chief financial officer, will get the CEO job, which the company said followed a review of internal and external candidates.

The broadcaster said the same thing when James Murdoch was controversially appointed as chief executive in 2003. News Corp. holds 39% of BSkyB.

The 34-year old Murdoch has had successes at the helm of the company, notably pushing the firm into acquisitions in the broadband arena, which has helped it offer the "triple-play" services of digital television, broadband Internet and telephony that are popular with consumers on both sides of the Atlantic.

He's also clashed with rivals and regulators. A long-running dispute has resulted in the basic cable channels that Sky runs being withdrawn from rival Virgin Media's
VMED
platform, and the company's purchase of a minority stake in broadcaster ITV (ITV) has been reprimanded by the British government, which will force Sky to divest at least some of that holding.

BSkyB shares have dropped around 14% since its last quarterly report, hurt both by regulatory concerns and fears of a U.K. consumer slowdown. On Friday, BSkyB shares slipped 0.5% in London.

"We expect a modest negative reaction in the share price following this news," said analysts from Goldman Sachs.

"While changes in senior management inevitably raise uncertainty over corporate strategy and the company is now without a CFO, we believe Darroch has been a highly visible member of management, strongly associated with current company policy, and James Murdoch remains chairman."

The appointment of James Murdoch as chairman runs against the grain of U.K. corporate governance standards, prompting the firm to note in a statement that "we are well aware of (corporate governance code) terms with respect to independence. Sky has strong independent directors, and we were quite clear that our overriding duty in selecting a chairman was to do what was in the best interest of the company and its shareholders."

A similar shift at banking giant HSBC
HBC, +1.06%
has encountered shareholder resistance.

The move at BSkyB comes as News Corp. announced that Les Hinton will take the helm as chief executive of Dow Jones & Co., once acquisition of the company is completed. See Dow Jones story.

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